It remains the task of managers to act as role models and to consistently and visibly sanction excesses that violate the company’s canon of values.

Dr. Johannes Schmidt

Dr. Johannes Schmidt
Chairman of the Board of Management of INDUS Holding AG

We spoke with Dr. Johannes Schmidt about #FutureGoodGovernance.
The interview was conducted before the outbreak of the Corona Pandemic.

A ship needs a captain. There is a lot of talk about new management concepts, about participation and freedom. How much leadership will a company still need in the future and how much agility can it tolerate? How do you envisage corporate management in the future?

Good companies need leadership: It’s all about clear target definitions within the framework of a defined and communicated strategy. It’s about tracking the achievement of goals and initiating measures if there is a threat of goals not being met. Agility and other management approaches are a means to an end. It is crucial that these methods are used when they fit and not because they are modern.

The world’s gretas have also drawn attention to companies and their fields of action. What challenges do you expect in terms of social responsibility and thus sustainability in the company?

The pressure on companies to make more intensive efforts to achieve sustainable management will continue to increase strongly. In addition to the actual work on the issue, the increasingly professional “selling” of sustainability performance – especially for listed companies – will continue to move to the fore. The network of legal regulations, requirements of rating agencies, requirements of lenders as well as requirements of proxies is becoming ever tighter, with some requirements even contradicting each other. In my opinion, however, the decisive factor remains first and foremost good work in terms of content, which does not opportunistically run after every new fashion, but rather orients companies towards the long-term sustainability of the future

Trust is good, control is better. Today, it is still primarily about numbers and compliance. However, artificial intelligence is also changing perspectives and thinking. How can you imagine a future system for monitoring the board of directors? Will there still be a supervisory board watching over the management or will the ‘monitoring’ be replaced by a technically highly equipped external service provider?

Monitoring by a technical system will only ever be able to perform part of the task of a supervisory board in the future. Such systems will certainly become effective initially in the quantitative area. However, in its complexity, the overall monitoring of a management board will always require the supervisory boards’ own varied experience in the assessment and evaluation of complex situations, but also discussions within the supervisory board and with the management board.

Companies are subject to a constant process of change. What challenges do you expect for your company in the next 10 years? How will they change your company? What will change for the employment and qualification of your employees?

With a clear focus on Germany and Central Europe, demographic changes will play a significant role in the company I manage in the coming years. Good vocational training (even beyond demand) remains a central task. In addition, we must prepare ourselves for even greater flexibility in working time models (flexibility, sabbaticals, lifetime working hours, …) in order to meet the increasing individual demands of a reduced number of employees and to retain them in the company. The longer employment and further qualification of older employees will also play an increasing role in times of further increasing retirement ages.

There is much debate about centrality vs. decentralization, agility and core competence in organizations. Will there still be companies in the current sense of the term in 20 years’ time? What changes in terms of corporate organization and financing do you expect or would you like to see?

In my estimation, there will still be companies in the current sense in 20 years’ time. At the latest when it comes to investment-intensive production processes, large corporate structures with their financial power will still be justified in the future. Also on the financing side, the banks (or their successors) will continue to demand appropriate structures and their money will not be enough to turn them into amorphous structures.

Nevertheless, I believe that especially in times of rapid change, the virtues of medium-sized companies will retain their high status. Small, flexible units under the umbrella of a strong overall structure will have considerable advantages over large corporate structures.

Car manufacturers are becoming mobility service providers, food producers are becoming lifestyle providers, media houses are becoming data science companies. In which direction will your industry develop? Will industries – as we know them today – still exist in ten years’ time? What will happen then?

Of course, the classic industries will continue to grow, because the things we use (and touch) have to be produced in the end. However, the traditional industries have to be careful that digitization does not push a value-added stage between them and their customers on the way to the consumer and rob them of a considerable part of their margin. This is why the examination of digital business models is also so important for the traditional industries.

Today, corporate leaders are being asked by various parties about the purpose of the company or the specific mission of the company. How do you meet this demand? What positive or critical lessons have you learned from this? What advice do you give a CEO of a different industry on how best to approach this topic?

There is an acute risk that companies will be overwhelmed by the diverse expectations of their various stakeholders. In my opinion, this increasingly means that companies are also being forced to perform tasks for society as a whole, which, if they so wished, could be solved by politics. As a manager, you have to be aware of these expectations. However, you cannot fulfil them all opportunistically, but you must always make a conscious decision not to fulfil certain expectations in specific individual cases. But this then requires active communication.

The so-called stakeholders, in particular the (institutional) shareholders, are exercising their ownership rights and obligations much more strongly than just a few years ago. It is therefore no longer enough to tick off the requirements of a code (“comply-or-explain”). Internationally, the intensive and permanent communication/interaction of stakeholders with corporate management is gaining ground (“apply-and-explain”). What trends do you see here and how do you assess them?

I see the current development especially in the area of Proxy Advisor very critically. There is an economically driven competition between the various organizations that try to outdo each other in their demands. Ultimately, the large institutional investors will have to decide whether their interests are ultimately served by this.

#FutureGoodGovernance is currently still comparable to a crystal ball in many areas. Which future aspects of good governance are particularly important to you? What would you wish for if you had three wishes? Where do you see the political challenge? And what responsibilities will companies and their managers have in the future?

Despite all the regulation, formalization, auditing and certification frenzy, in the end there is no way around a value-based management of companies in order to remain successful in the long term. It remains the task of managers to act as role models and to consistently and visibly sanction excesses that violate the company’s canon of values.

Politicians should stop trying to regulate the concrete actions of companies in individual cases, because they are not the “better entrepreneur”. It is about creating the right framework conditions within which companies can then develop.

Shareholders and partners should take their investment decisions on a long-term basis and thus support companies that operate with a clear strategy and value-based management.

Thank you very much for the interview!